Market Update 10:25 AM ET

Float/Lock Bias: Carefully floating with prices at resistance, matching best pricing of the year

Current Price of FNMA 4.0% Bond: $105.12, +6bp

This day, 152 years ago, Mexicos army put a whooping on a much larger & far more-sophisticated, but ill-prepared, French Army at the Battle of Puebla. So when you enjoy your margarita and nachos later lets toast and remember this day of pride and unity.

Mortgage Bonds are having their own little battle right now. Take a look at the Bond Chart in either a quarter, six-month or even a yearly viewit clearly shows Bond prices at the best levels of year and smack at resistance. We like the way Bonds have been performing of late, considering all the hogwash in the media that Bonds will fall upon tapering of QE3 which clearly has not been the case.

And unfortunately there are some real-life battles happening right now in the Ukraine and tensions have escalated and caused a safe haven flight into the US Dollar and US Bond Market. Friday's better than expected Non-farm Payrolls (288K versus 210K) initially sent Bond prices plunging until news surfaced that Russian forces attacked eastern Ukraine, which shifted assets into the safe haven of the Bond markets. That trade is following through so far this morning.

There is little economic data this week to influence the markets. But the Treasury will be selling a total of $69B in Notes and Bonds this week and with prices at the highest levels in some time, it will be very interesting to see the buying appetite.

If the transaction is shorter-term in nature and the pricing fits the borrower consider locking here. In order for rates to move another leg lower, the Bond will have to bust above this nearby ceiling. We think that may just happen so for your longer-term transactions closing weeks and months out, lets see if Bonds can win their little battle at resistance and march into the best pricing levels in a year.

Final word of caution the trading mantra Sell in May and Go Away worked in the Bond market last May as well as a few other times in the last decadeso be prepared to lock everything should prices start to sour.